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169
G.R. No. 183553. November 12, 2012.*
DIAGEO PHILIPPINES, INC., petitioner, vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
Taxation; Excise Taxes; Tax Refund; The Court has
categorically declared that “[t]he proper party to question, or seek a
refund of, an indirect tax is the statutory taxpayer, the person on
whom the tax is imposed by law and who paid the same even if he
shifts the burden thereof to another.”—The phrase “any excise tax
paid thereon shall be credited or refunded” requires that the
claimant be the same person who paid the excise tax. In Silkair
(Singapore) Pte. Ltd. v. Commissioner of Internal Revenue, 544
SCRA 100 (2008), the Court has categorically declared that “[t]he
proper party to question, or seek a refund of, an indirect tax is the
statutory taxpayer, the person on whom the tax is imposed by law
and who paid the same even if he shifts the burden thereof to
another.”
Same; Same; Words and Phrases; Excise taxes imposed under
Title VI of the Tax Code are taxes on property which are imposed
on “goods manufactured or produced in the Philippines for
domestic sales or consumption or for any other disposition and to
things imported.”—Excise taxes imposed under Title VI of the Tax
Code are taxes on property which are imposed on “goods
manufactured or produced in the Philippines for domestic sales or
consumption or for any other disposition and to things imported.”
Though excise taxes are paid by the manufacturer or producer
before removal of domestic products from the place of production
or by the owner or importer before the release of imported articles
from the customs house, the same partake of the nature of
indirect taxes when it is passed on to the subsequent purchaser.
Same; Same; Same; Indirect Taxes; Indirect taxes are defined
as those wherein the liability for the payment of the tax falls on one
person but the burden thereof can be shifted to another person.—
Indirect taxes are defined as those wherein the liability for the
payment of the tax falls on one person but the burden thereof can
be
_______________
* SECOND DIVISION.
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Diageo Philippines, Inc. vs. Commissioner of Internal Revenue
shifted to another person. When the seller passes on the tax to his
buyer, he, in effect, shifts the tax burden, not the liability to pay
it, to the purchaser as part of the price of goods sold or services
rendered. Accordingly, when the excise taxes paid by the supplier
were passed on to Diageo, what was shifted is not the tax per se
but an additional cost of the goods sold. Thus, the supplier
remains the statutory taxpayer even if Diageo, the purchaser,
actually shoulders the burden of tax.
Same; Taxpayer; Words and Phrases; As defined in Section
22(N) of the Tax Code, a taxpayer means any person subject to tax.
—As defined in Section 22(N) of the Tax Code, a taxpayer means
any person subject to tax. He is, therefore, the person legally
liable to file a return and pay the tax as provided for in Section
130(A). As such, he is the person entitled to claim a refund.
Same; Excise Taxes; Tax Refund; The person entitled to claim
a tax refund is the statutory taxpayer or the person liable for or
subject to tax.—The person entitled to claim a tax refund is the
statutory taxpayer or the person liable for or subject to tax. In the
present case, it is not disputed that the supplier of Diageo
imported the subject raw alcohol, hence, it was the one directly
liable and obligated to file a return and pay the excise taxes under
the Tax Code before the goods or products are removed from the
customs house. It is, therefore, the statutory taxpayer as
contemplated by law and remains to be so, even if it shifts the
burden of tax to Diageo. Consequently, the right to claim a
refund, if legally allowed, belongs to it and cannot be transferred
to another, in this case Diageo, without any clear provision of law
allowing the same.
Same; Tax Exemptions; Statutes granting tax exemptions are
construed stricissimi juris against the taxpayer and liberally in
favor of the taxing authority.—Statutes granting tax exemptions
are construed stricissimi juris against the taxpayer and liberally
in favor of the taxing authority. A claim of tax exemption must be
clearly shown and based on language in law too plain to be
mistaken. Unfortunately, Diageo failed to meet the burden of
proof that it is covered by the exemption granted under Section
130(D) of the Tax Code. In sum, Diageo, not being the party
statutorily liable to pay excise taxes and having failed to prove
that it is covered by the exemption granted under Section 130(D)
of the Tax Code, is not the proper
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170 Diageo Philippines, Inc. vs. Commissioner of Internal

Revenue

170 SUPREME COURT REPORTS ANNOTATED

The Factual Antecedents
Diageo Philippines, Inc. vs. Commissioner of Internal Revenue
Petitioner Diageo Philippines, Inc. (Diageo) is a domestic
corporation organized and existing under the laws of the
party to claim a refund or credit of the excise taxes paid on the
Republic of the Philippines and is primarily engaged in the
ingredients of its exported locally produced liquor.
business of importing, exporting, manufacturing,
marketing, distributing, buying and selling, by wholesale,
PETITION for review on certiorari of a decision of the
all kinds of beverages and liquors and in dealing in any
Court of Tax Appeals.
material, article, or thing required in connection with or
  The facts are stated in the opinion of the Court.
incidental to its principal business.3 It is registered with
  Noval & Buñag Law Office for petitioner.
the Bureau of Internal Revenue (BIR) as an excise tax
PERLAS-BERNABE, J.: taxpayer, with Tax Identification No. 000-161-879-000.4
Before the Court is a Petition for Review under Rule 45 For the period November 1, 2003 to December 31, 2004,
of the Rules of Court assailing the Decision1 of the Court of Diageo purchased raw alcohol from its supplier for use in
Tax Appeals (CTA) En Banc dated July 2, 2008 in CTA EB the manufacture of its beverage and liquor products. The
No. 260. supplier imported the raw alcohol and paid the related
The petition seeks the proper interpretation of Section excise taxes thereon before the same were sold to the
130(D)2 of the National Internal Revenue Code of 1997 petitioner.5 The purchase price for the raw alcohol
(Tax Code), particularly, on the question of who may claim included, among others, the excise taxes paid by the
the refund or tax credit of excise taxes paid on goods supplier in the total amount of P12,007,528.83.6
actually exported. Subsequently, Diageo exported its locally manufactured
liquor products to Japan, Taiwan, Turkey and Thailand
and received the corresponding foreign currency proceeds of
_______________
such export sales.7
1 Rollo, pp. 13-27. Penned by Associate Justice Lovell R. Bautista, with
Within two (2) years from the time the supplier paid the
Associate Justices Juanito C. Castañeda, Jr., Erlinda P. Uy, Caesar A.
subject excise taxes, Diageo filed with the BIR Large
Casanova, Olga Palanca-Enriquez, concurring and Presiding Justice
Taxpayer’s Audit and Investigation Division II applications
Ernesto D. Acosta, dissenting.
for tax refund/issuance of tax credit certificates
2 Sec. 130. Filing of Return and Payment of Excise Tax on Domestic
corresponding to the excise taxes which its supplier paid
Products.—
but passed on to it as
x x x
(D) Credit for Excise tax on Goods Actually Exported.—When goods
_______________
locally produced or manufactured are removed and actually exported
3 Rollo, p. 14.
without returning to the Philippines, whether so exported in their original
4 Id., at p. 15.
state or as ingredients or parts of any manufactured goods or products,
5 Id.
any excise tax paid thereon shall be credited or refunded upon submission
6 Id., at p. 49.
of the proof of actual exportation and upon receipt of the corresponding
foreign exchange payment: Provided, That the excise tax on mineral 7 Id., at p. 48.

products, except coal and coke, imposed under Section 151 shall not be
172
creditable or refundable even if the mineral products are actually
exported.
172 SUPREME COURT REPORTS ANNOTATED
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part of the purchase price of the subject raw alcohol
invoking Section 130(D) of the Tax Code.
However, due to the failure of the respondent
Commissioner of Internal Revenue (CIR) to act upon
Diageo’s claims, the latter was constrained to timely file a
petition for review before the CTA.8
On December 27, 2005, the CIR filed its Answer
assailing Diageo’s lack of legal personality to institute the
claim for refund because it was not the one that paid the
alleged excise taxes but its supplier.9 Subsequently, the
CIR filed a motion to dismiss reiterating the same issue.10
The Ruling of the Court of Tax Appeals
On July 20, 2006, the CTA Second Division issued a
Resolution11 dismissing the petition on the ground that
Diageo is not the real party in interest to file the claim for
refund. Citing Philippine Acetylene Co., Inc. v.
Commissioner of Internal Revenue,12 the CTA Second
Division ruled that although an excise tax is an indirect tax
which can be passed on to the purchaser of goods, the
liability therefor still remains with the manufacturer or
seller, hence, the right to claim refund is only available to
it.13 Diageo filed a motion for reconsideration which was
subsequently denied in the Resolution dated January 8,
2007.14
On February 13, 2007, Diageo filed a petition for
review15 which the CTA En Banc in its Decision dated July
2, 2008
_______________
8  Id., at p. 16.
9  Id.
10 Id.
11  Id., at pp. 145-149. Signed by Associate Justices Juanito C.
Castañeda Jr., Erlinda P. Uy and Olga Palanca-Enriquez.
12 G.R. No. 19707, August 17, 1967, 10 SCRA 1056.
13 Supra note 11, at p. 148.
14 Rollo, pp. 166-167.
15 Id., at pp. 168-194.
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dismissed, thereby affirming the ruling of the CTA Second
Division.16
Citing Rule 3, Section 2,17 of the Rules of Court, the CTA
En Banc held that the right to a refund or tax credit of the
excise taxes under Section 130(D) of the Tax Code is
available only to persons enumerated in Sections 130(A)
(1)18 and (2)19 of
_______________
16 Id., at pp. 13-27.
17  Sec. 2. Parties in interest.—A real party in interest is the party
who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. Unless otherwise authorized by law
or these Rules, every action must be prosecuted or defended in the name
of the real party in interest.
18 Sec. 130. Filing of Return and Payment of Excise Tax on Domestic
Products.—
(A) Persons Liable to File a Return, Filing of Return on Removal and
Payment of Tax.—
(1) Persons Liable to File a Return.—Every person liable to pay excise
tax imposed under this Title shall file a separate return for each place of
production setting forth, among others the description and quantity or
volume of products to be removed, the applicable tax base and the amount
of tax due thereon: Provided, however, That in the case of indigenous
petroleum, natural gas or liquefied natural gas, the excise tax shall be
paid by the first buyer, purchaser or transferee for local sale, barter or
transfer, while the excise tax on exported products shall be paid by the
owner, lessee, concessionaire or operator of the mining claim.
Should domestic products be removed from the place of production
without the payment of the tax, the owner or person having possession
thereof shall be liable for the tax due thereon.
19 Sec. 130. Filing of Return and Payment of Excise Tax on Domestic
Products.—
(2) Time for Filing of Return and Payment of the Tax.—Unless
otherwise specifically allowed, the return shall be filed and the excise tax
paid by the manufacturer or producer before removal of domestic products
form place of production: Provided, That the tax excise on locally
manufactured petroleum
174
174 SUPREME COURT REPORTS ANNOTATED
Diageo Philippines, Inc. vs. Commissioner of Internal
Revenue
the same Code because they are the ones primarily and
legally liable to pay such taxes. As Diageo failed to prove
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that it had actually paid the claimed excise taxes as
manufacturer-exporter, the CTA En Banc likewise did not
find it as the proper party to claim a refund. Hence, the
instant petition.
Diageo claims to be a real party in interest entitled to
recover the subject refund or tax credit because it stands to
be benefited or injured by the judgment in this suit.20 It
contends that the tax privilege under Section 130(D)
applies to every exporter provided the conditions therein
set forth are complied with, namely, (1) the goods are
exported either in their original state or as ingredients or
part of any manufactured goods or products; (2) the
exporter submits proof of exporta-
_______________
products and indigenous petroleum/levied under Sections 148 and
151(A)(4), respectively, of this Title shall be paid within ten (10) days from
the date of removal of such products for the period from January 1, 1998
to June 30, 1998; within five (5) days from the date of removal of such
products for the period from July 1, 1998 to December 31, 1998; and,
before removal from the place of production of such products from January
1, 1999 and thereafter: Provided, further, That the excise tax on
nonmetallic mineral or mineral products, or quarry resources shall be due
and payable upon removal of such products from the locality where mined
or extracted, but with respect to the excise tax on locally produced or
extracted metallic mineral or mineral products, the person liable shall file
a return and pay the tax within fifteen (15) days after the end of the
calendar quarter when such products were removed subject to such
conditions as may be prescribed by rules and regulations to be
promulgated by the Secretary of Finance, upon recommendation of the
Commissioner. For this purpose, the taxpayer shall file a bond in an
amount which approximates the amount of excise tax due on the removals
for the said quarter. The foregoing rules notwithstanding, for imported
mineral or mineral products, whether metallic or nonmetallic, the excise
tax due thereon shall be paid before their removal from customs custody.
20 Rollo at pp. 54-55.
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Diageo Philippines, Inc. vs. Commissioner of Internal
Revenue
tion; and (3) the exporter likewise submits proof of receipt
of the corresponding foreign exchange payment.21 It argues
that Section 130(D) does not limit the grant of the tax
privilege to manufacturers/producers-exporters only but to
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every exporter of locally manufactured/produced goods
subject only to the conditions aforementioned.22
The Issue
The sole issue to be resolved is whether Diageo has the
legal personality to file a claim for refund or tax credit for
the excise taxes paid by its supplier on the raw alcohol it
purchased and used in the manufacture of its exported
goods.
Ruling of the Court
The petition is without merit.
Excise taxes partake of the nature
of indirect taxes.
Diageo bases its claim for refund on Section 130 of the
Tax Code which reads:
Section 130. Filing of Return and Payment of Excise Tax on
Domestic Products.―xxx
(A) Persons Liable to File a Return, Filing of Return on
Removal and Payment of Tax.―
(1) Persons Liable to File a Return.―Every person liable
to pay excise tax imposed under this Title shall file a
separate return for each place of production setting forth,
among others, the description and quantity or volume of
products to be removed, the applicable tax base and the
amount of tax due thereon; Provided however, That in the
case of indige-
_______________
21 Id., at p. 57.
22 Id., at p. 60.
176
176 SUPREME COURT REPORTS ANNOTATED
Diageo Philippines, Inc. vs. Commissioner of Internal Revenue
nous petroleum, natural gas or liquefied natural gas, the
excise tax shall be paid by the first buyer, purchaser or
transferee for local sale, barter or transfer, while the excise
tax on exported products shall be paid by the owner, lessee,
concessionaire or operator of the mining claim. Should
domestic products be removed from the place of production
without the payment of the tax, the owner or person having
possession thereof shall be liable for the tax due thereon.
   xxxx
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(D) Credit for Excise tax on Goods Actually Exported.―When
goods locally produced or manufactured are removed and actually
exported without returning to the Philippines, whether so
exported in their original state or as ingredients or parts of any
manufactured goods or products, any excise tax paid thereon shall
be credited or refunded upon submission of the proof of actual
exportation and upon receipt of the corresponding foreign
exchange payment: Provided, That the excise tax on mineral
products, except coal and coke, imposed under Section 151 shall
not be creditable or refundable even if the mineral products are
actually exported.
A reading of the foregoing provision, however, reveals
that contrary to the position of Diageo, the right to claim a
refund or be credited with the excise taxes belongs to its
supplier. The phrase “any excise tax paid thereon shall be
credited or refunded” requires that the claimant be the
same person who paid the excise tax. In Silkair (Singapore)
Pte. Ltd. v. Commissioner of Internal Revenue, the Court
has categorically declared that “[t]he proper party to
question, or seek a refund of, an indirect tax is the
statutory taxpayer, the person on whom the tax is imposed
by law and who paid the same even if he shifts the burden
thereof to another.”23
Excise taxes imposed under Title VI of the Tax Code are
taxes on property24 which are imposed on “goods
manufactured or produced in the Philippines for domestic
sales or
_______________
23 G.R. No. 173594, February 6, 2008, 544 SCRA 100, 112.
24 Petron Corporation v. Tiangco, G.R. No. 158881, April 16, 2008, 551
SCRA 484, 493-494.
177
VOL. 685, NOVEMBER 12, 2012 177
Diageo Philippines, Inc. vs. Commissioner of Internal
Revenue
consumption or for any other disposition and to things
imported.”25 Though excise taxes are paid by the
manufacturer or producer before removal of domestic
products from the place of production26 or by the owner or
importer before the release of imported articles from the
customs house,27 the same partake of the nature of indirect
taxes when it is passed on to the subsequent purchaser.
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Indirect taxes are defined as those wherein the liability
for the payment of the tax falls on one person but the
burden thereof can be shifted to another person. When the
seller passes on the tax to his buyer, he, in effect, shifts the
tax burden, not the liability to pay it, to the purchaser as
part of the price of goods sold or services rendered.28
Accordingly, when the excise taxes paid by the supplier
were passed on to Diageo, what was shifted is not the tax
per se but an additional cost of the goods sold. Thus, the
supplier remains the statutory taxpayer even if Diageo, the
purchaser, actually shoulders the burden of tax.
The statutory taxpayer is the
proper party to claim refund
of indirect taxes.
As defined in Section 22(N) of the Tax Code, a taxpayer
means any person subject to tax. He is, therefore, the
person legally liable to file a return and pay the tax as
provided for in Section 130(A). As such, he is the person
entitled to claim a refund.
Relevant is Section 204(C) of the Tax Code which
provides:
_______________
25 TAX CODE, Sec. 129.
26 TAX CODE, Sec. 130(A)(2).
27 TAX CODE, Sec. 131(A).
28 CIR v. PLDT Co., G.R. No. 140230, December 15, 2005, 478 SCRA
61, 72.
178
178 SUPREME COURT REPORTS ANNOTATED
Diageo Philippines, Inc. vs. Commissioner of Internal
Revenue
Section 204. Authority of the Commissioner to Compromise,
Abate, and Refund or Credit Taxes.―The Commissioner may―
x x x x
(C) Credit or refund taxes erroneously or illegally received or
penalties imposed without authority, refund the value of internal
revenue stamps when they are returned in good condition by the
purchaser, and, in his discretion, redeem or change unused
stamps that have been rendered unfit for use and refined their
value upon proof of destruction. No credit or refund of taxes or
penalties shall be allowed unless the taxpayer files in writing
with the Commissioner a claim for credit or refund within two (2)
years after the payment of the tax or penalty: Provided, however,
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that a return filed showing an overpayment shall be considered as covered by the exemption granted under Section 130(D) of
a written claim for credit or refund. (Emphasis supplied) the Tax Code, is not the proper party to claim a refund or
credit of the excise taxes paid on the ingredients of its
Pursuant to the foregoing, the person entitled to claim a exported locally produced liquor.
tax refund is the statutory taxpayer or the person liable for WHEREFORE, the petition is DENIED and the assailed
or subject to tax.29 In the present case, it is not disputed CTA En Banc Decision in CTA EB No. 260 dated July 2,
that the supplier of Diageo imported the subject raw 2008 is AFFIRMED.
alcohol, hence, it was the one directly liable and obligated SO ORDERED.
to file a return and pay the excise taxes under the Tax
Code before the goods or products are removed from the Carpio (Chairperson), Brion, Del Castillo and Perez,
customs house. It is, therefore, the statutory taxpayer as JJ., concur. 
contemplated by law and remains to be so, even if it shifts
the burden of tax to Diageo. Consequently, the right to Petition denied, judgment affirmed.
claim a refund, if legally allowed, belongs to it and cannot
be transferred to another, in this case Diageo, without any Notes.—Excise taxes, which apply to articles
clear provision of law allowing the same. manufactured or produced in the Philippines for domestic
Unlike the law on Value Added Tax which allows the sale or consumption or for any other disposition and to
subsequent purchaser under the tax credit method to things imported into the Philippines, is basically an
refund or credit input taxes passed on to it by a supplier,30 indirect tax. (Silkair [Singapore] Pte. Ltd. vs.
no provision for excise taxes exists granting non-statutory Commissioner of Internal Revenue, 664 SCRA 33 [2012])
taxpayer like Diageo to claim a refund or credit. It should
also be stressed _______________
31  Quezon City v. ABS-CBN Broadcasting Corp., G.R. No. 166408,

_______________ October 6, 2008, 568 SCRA 496, 515.

29 See TAX CODE, Sec. 22(N).
180
30 See Commissioner of Internal Revenue v. Seagate Technology (Phil.),
G.R. No. 153866, February 11, 2005, 451 SCRA 132, 141-143; Tax Code,
Sec. 110(B). 180 SUPREME COURT REPORTS ANNOTATED
Diageo Philippines, Inc. vs. Commissioner of Internal
179
Revenue

VOL. 685, NOVEMBER 12, 2012 179 Excise taxes, as the term is used in the National
Diageo Philippines, Inc. vs. Commissioner of Internal Internal Revenue Code (NIRC), refer to taxes applicable to
Revenue certain specified goods or articles manufactured or
produced in the Philippines for domestic sales or
consumption or for any other disposition and to things
that when the excise taxes were included in the purchase
imported into the Philippines. (Commissioner of Internal
price of the goods sold to Diageo, the same was no longer in
Revenue vs. Pilipinas Shell Petroleum Corporation, 671
the nature of a tax but already formed part of the cost of
SCRA 241 [2012])
the goods.
——o0o—— 
Finally, statutes granting tax exemptions are construed
stricissimi juris against the taxpayer and liberally in favor
of the taxing authority. A claim of tax exemption must be
clearly shown and based on language in law too plain to be
mistaken.31 Unfortunately, Diageo failed to meet the
burden of proof that it is covered by the exemption granted
under Section 130(D) of the Tax Code.
© Copyright 2019 Central Book Supply, Inc. All rights reserved.
In sum, Diageo, not being the party statutorily liable to
pay excise taxes and having failed to prove that it is
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